NEWS BULLETIN

May 19, 2011 --- Vol. 17, No. 45May 2011

AIDEA considering changes to jack-up deal

There might only be one jack-up rig in Cook Inlet this summer.

The Alaska Industrial Development and Export Authority is considering several changes to its proposed agreement with Kenai Offshore Ventures LLC that would push back the timeline for exploration activities by a year, but aim to strengthen the financial structure between the public corporation of the State of Alaska and the private joint venture.

Kenai Offshore Ventures, or KOV, is currently a joint venture between the Australian independent Buccaneer Energy Ltd. and the marine company Ezion Holdings Ltd.

In a unanimous vote on April 1, the AIDEA board gave its staff the go ahead to partner with KOV by spending up to $30 million toward the cost of a jack-up rig. To finalize the deal, AIDEA and KOV need to execute a Joint Ownership Agreement that sets out the terms of the financial agreement. AIDEA is now considering amendments to that JOA.

The AIDEA board scheduled a vote on the amended agreement for tomorrow, after Petroleum News goes to print, but according to documents AIDEA posted on its website in advance of the meeting, the board is considering four major changes to the JOA:

• Drilling would begin in spring or early summer 2012, rather than this summer.

• The parties would begin buying back AIDEA’s ownership stake in the project and paying AIDEA regular dividends starting on Jan. 1, 2013, rather than Jan. 1, 2012.

• A previously agreed-upon lien on Buccaneer’s worldwide holdings would go into effect once the deal closes, rather than in the event that Buccaneer defaults on its payments.

• AIDEA would join KOV alongside Buccaneer and Ezion, using its newly granted authority to join limited liability corporations. AIDEA said its lawyers recommend submitting to Delaware law for the sake of joining a Delaware-formed corporation, but noted that any disputes would still be handled in Alaska Superior Court in Anchorage.

AIDEA said the delays are the result of a “lengthy and tough negotiation process, necessary to ensure that Authority’s interests are protected,” but added that having another year brings “the side benefit of allowing for a more orderly process for acquisition, refitting and commissioning of the Rig.” The second two changes bring the proposed agreement more in line with AIDEA’s goals and interests, AIDEA said.

The amended agreement includes numerous other changes not considered “material.”

If AIDEA approves the changes, it would mean that the only chance for having a jack-up rig in Cook Inlet this year lies with Escopeta Oil. The Houston company is currently shipping the Spartan 151 rig to Alaska, and expects it to arrive in Homer on May 25.

See full story in May 22 issue, available at 11 a.m. Friday, May 20, at www.PetroleumNews.com


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